The Synthetic Derivative: Creating and Betting on Markets That Don't Exist
Master the art of financial engineering in sports betting. Learn to combine existing markets to create synthetic positions with lower hold, better odds, and edges the books never intended to offer.
The Core Concept
A synthetic derivative is a betting position created by combining two or more existing bets to replicate—or improve upon—a market that either doesn't exist or has worse odds. Think of it like creating a stock option from the underlying shares.
Example: 1H Under 21.5 (-110) + Live 2H Under 24.5 (-105) = Synthetic Full Game Under 46 at -107.75 combined hold
vs Official Pre-Game Under 46 at -110 = 2.25% edge captured
Synthetic Building Tools
Why Synthetic Positions Create Edge
Sportsbooks price each market independently with its own juice. When you combine markets, you're often paying less total juice than on the equivalent single market—or accessing prices the book doesn't directly offer. Here's why synthetics work:
Lower Combined Hold
Two markets at -108/-108 have ~3.7% hold each. But the correlation between them means the combined position often has lower effective hold than a single -110/-110 market (4.5%).
Cross-Market Inefficiency
Books price team totals and game totals separately. The math doesn't always align perfectly, creating opportunities to construct synthetics at better prices than official lines.
Temporal Arbitrage
Pre-game 1H lines + live 2H lines often price a full game differently than the pre-game total. You can exploit timing differences between when markets are posted.
Correlation Mispricing
Books don't perfectly account for correlation between related markets. Combining correlated positions can create synthetic value the book's math missed.
The Mathematics of Synthetic Construction
Basic Synthetic Formula
Synthetic Implied Probability:
P(synthetic) = P(leg1) × P(leg2) × Correlation_Adjustment
Synthetic Effective Odds:
Odds = (1 / P(synthetic)) - 1 → Convert to American format
Edge Calculation:
Edge = (Official_Implied_Prob - Synthetic_Implied_Prob) / Synthetic_Implied_Prob
1First Half + Second Half = Synthetic Full Game
The most common and accessible synthetic strategy. You're creating a full-game position by combining half-game bets, often at better prices than the official full-game line.
NFL Totals: 1H + 2H = Full Game Synthetic
| Component | Line | Odds | Implied Prob |
|---|---|---|---|
| 1H Under | 21.5 | -108 | 51.9% |
| 2H Under (Live at Half) | 23.5 | -105 | 51.2% |
| Synthetic Full Under | 45.0 | ~-106.5* | 51.5% |
| Official Pre-Game Under | 45.5 | -110 | 52.4% |
*Synthetic odds account for correlation (both unders must hit). You get a half-point better line AND better juice.
Key Insight: Correlation Works in Your Favor
First half and second half unders are positively correlated. If the first half goes under, the game is likely on pace for under overall, making the 2H under more likely. Books price halves independently—your synthetic captures this correlation edge.
Half-to-Full Correlation Factors by Sport
| Sport | Under/Under | Over/Over | Best Window | Edge Potential |
|---|---|---|---|---|
| NFL | +0.68 | +0.72 | Halftime | High |
| NBA | +0.55 | +0.61 | End of Q2 | Medium |
| NHL | +0.71 | +0.58 | 2nd Intermission | High |
| MLB | +0.48 | +0.52 | 5th Inning | Medium |
| Soccer | +0.64 | +0.51 | Halftime | High |
2Team Total + Team Total = Synthetic Game Total
Combine individual team totals to create a synthetic game total. This often reveals pricing inefficiencies because books price team totals with different models than game totals.
NBA Example: Team Totals vs Game Total
Official Team Totals
Synthetic Game Total
Official Game Total
Over 227.5 @ -110
Gap Found!
0.5 point discrepancy
Critical: Correlation Kills Parlay Value
You CANNOT simply parlay team overs to create a game over. The outcomes are highly correlated (if one team scores a lot, the other often does too in high-scoring games). This type of synthetic is for price comparison only—bet the official market if the synthetic reveals mispricing.
3Alternate Line Synthesis: Creating Lines That Don't Exist
Sometimes you want to bet a specific number that isn't offered. By combining alternate lines, you can create synthetic positions at any point you want.
Creating a Synthetic NFL -5 Line
Book offers -3 (-110) and -7 (-110). You want -5, which isn't available.
Outcome Analysis: Win by 1-4 = lose half, win half (break even). Win by 5-6 = lose -7, win -3 (small profit). Win by 7+ = win both. This creates effective exposure to -5.
4Spread + Total = Synthetic Team Total
One of the most powerful synthetics: combine a spread with a game total to create an implied team total, then compare to the official team total for arbitrage opportunities.
The Math: Deriving Team Totals
Given:
Spread: Chiefs -7 | Total: 49.5
Implied Team Totals:
Chiefs = (Total + Spread) / 2 = (49.5 + 7) / 2 = 28.25
Opponent = (Total - Spread) / 2 = (49.5 - 7) / 2 = 21.25
Compare to Official:
If official Chiefs team total is 27.5, there's a 0.75 point discrepancy to exploit!
5Pre-Game + Live = Temporal Synthetic Arbitrage
The holy grail of synthetics: using pre-game bets combined with live hedges to create risk-free or reduced-risk positions that outperform any single market.
Temporal Arbitrage Example: NFL Moneyline
Bet $100 on Underdog +180
Potential win: $180
Underdog scores first, leads 7-0
Live ML shifts to +110
Hedge $130 on Favorite -130
Guaranteed profit: ~$50 regardless of outcome
The 6-Step Synthetic Construction Process
Identify the Target Position
What market are you trying to replicate or improve? Full game total? Team total? A specific spread?
Find Component Markets
What existing bets can be combined to create this position? 1H + 2H? Team totals? Alternates?
Calculate Correlation Factor
Use historical data to determine how correlated the components are. Higher correlation = less parlay value but better single-bet comparison.
Compute Synthetic Fair Value
Using the Parlay Calculator and correlation adjustment, determine what the synthetic position should be worth.
Compare to Official Market
Use the True Odds Calculator to compare your synthetic to the official market. Is there edge?
Execute or Arbitrage
If edge exists, either bet the synthetic directly (if uncorrelated) or bet the better-priced official market the synthetic revealed.
Advanced: Cross-Book Synthetic Arbitrage
The ultimate synthetic strategy: using different books' pricing of related markets to create guaranteed profit positions.
Cross-Book Team Total Arbitrage
| Book | Team A Over | Team B Over | Synthetic Total |
|---|---|---|---|
| FanDuel | O 24.5 (-108) | O 21.5 (-112) | 46.0 |
| DraftKings | O 24.5 (-112) | O 21.5 (-105) | 46.0 |
| Best Synthetic | FanDuel (-108) | DraftKings (-105) | 46.0 @ ~-106.5 |
| Official Game Over | Any Book | 45.5 @ -110 | |
Result: Synthetic gives you O46 at better juice than official O45.5. If correlation-adjusted, this reveals the official under 45.5 is overpriced.
5 Common Synthetic Mistakes
Ignoring Correlation
Parlaying correlated outcomes destroys value. Team overs are correlated, half totals are correlated. Always adjust for this.
Forgetting the Vig Compounds
Two -110 bets parlayed isn't -110 effective odds—it's worse. Account for how juice compounds across legs.
Not Accounting for Timing Risk
1H + Live 2H synthetics require you to be watching and able to bet at halftime. Factor in execution risk.
Overcomplicating for Small Edge
A 0.5% edge on a complex synthetic isn't worth the execution risk. Target 2%+ edges to justify complexity.
Using Synthetics for Correlated Parlays
Synthetics are for price discovery and creating unavailable lines—not for building "smart" parlays. Correlation kills parlay EV.
Real-World Example: Super Bowl LVIII Synthetic
Chiefs vs 49ers: Creating a Synthetic Under
Pre-Game Lines (Sunday Morning):
- Full Game Total: 47.5 (-110/-110)
- 1H Total: 23.5 (-108/-112)
At Halftime (Score: 10-10):
- 2H Live Total: 24.5 (-105/-115)
- Adjusted Full Game Live: 44.5 (-108/-112)
Synthetic Analysis:
- 1H Under 23.5 HIT (20 points scored)
- 2H Under 24.5 available at -105
- Synthetic Full Under 44.5 at effectively -106.5
- vs Live Full Under 44.5 at -108
- Edge captured: 1.5% on the synthetic route
Key Takeaways
- Synthetics are for price discovery and creating unavailable positions—not for "outsmarting" parlays
- Always adjust for correlation: positively correlated legs reduce parlay value but reveal mispricing
- The best synthetic opportunities come from temporal arbitrage (pre-game + live combinations)
- Use synthetics to compare markets, then bet the official line if it's mispriced
- Target 2%+ edge to justify the complexity and execution risk of synthetic strategies
Responsible Gambling
Sports betting should be fun, not a financial burden. Only bet what you can afford to lose. If gambling stops being enjoyable, please seek help.
National Problem Gambling Helpline: 1-800-522-4700